Lehmann, Ullman and Barclay LLP Certified Public Accountants
Tax Reform Timber

The Ways and Means Committee of the US House and Tax Reform Affecting Timber Taxation


In 2012, supported by the Leadership of the US House, then Ways And Means Committee Chairman Dave Camp embarked on complete tax reform of the tax code. At the same time then Senate Finance Chairman Max Baucus agreed that tax reform would be a priority for his committee.


In the next several years tax reform proposals were undertaken at a serious level by the committee staff resulting in a draft proposal issued on February 26, 2014.


At the end of March, 2014, Chairman Dave Camp announced that he would retire.


Sources tell the Forest Landowners Tax Council, of which I am a member, that this did not signal the end of the tax proposals by Representative Dave Camp. The committee staff was heavily involved in the preparation of the tax reform proposals and that same committee staff continues with the committee. There is a working draft of the tax reform simply waiting to be resurrected by the current Committee Chairman at any time.


The Forest Landowners Tax Council as well as well-known private forest land advocacy organizations responded to the draft efforts and to the initial draft of the committee’s tax reform proposal by noting that it would eliminate real estate investment trusts and noting that that there were no provisions for:


  1. The current deduction for timber growing costs which would allow landowners to deduct operating in silvicultural costs rather than capitalizing the costs and deducting them only when there was a sale of the timber.
  2. Timber revenue should be subject to capital gains. Timber owners have been able to recognize the long-term nature of timber investment and treat the proceeds from timber harvest or the sale of standing trees as capital gains. This is codified in 1943 and is important to recognize the long-term nature of the investment in timber properties.
  3. Timber owners are allowed to deduct and/or amortizes their reforestation expenses. Reforestation is a significant upfront cost to the timber owner and the ability to deduct and/or amortize these costs encourages the investment in forestation and reforestation. Enhancing the investment opportunity increases our national forests in the hands of private owners. Currently Forest owners may deduct their reforestation expenses up to $10,000 per Qualified Timber Property and amortize the balance over an 84 month period.


The Camp Committee Staff considered these benefits to be “tax expenses.” That is, the ability to deduct current costs of reforestation, operation and to use a favorable capital gains tax rate are considered ways the government is paying or benefiting you to grow trees. These are “expenditures” the government makes to you and not the taxes which government collects. Instead of considering what forest landowners contribute to the government and the general welfare, the tax committees consider the taxation effects of Timber to be EXPENSES or something given up by the government. It is important to understand the impact of this thought process. These expenditures from 2013 to 2017 were estimated by the Joint Committee on Taxation to be (1) Operating and silvicultural expenses, $1.3Bil; (2) Special capital gains tax rate, $2.5 Bil; and (3) Reforestation expense and amortization, $1.1 Bil.


It is SIGNIFICANT that there is draft legislation simply waiting to be resurrected which does not contain these valuable provisions. If and when the draft legislation is resurrected, it will be an uphill fight to make Congress aware of the important aspects of forest land ownership and beneficial provisions.


This is the time to contact your representative and express your concerns about the draft legislation and in fact, any reform legislation without these important benefits.


Remember, there has been a significant investment of staff and Committee time for this proposal which is dormant at the present time. This is the perfect time to let your representative know your concerns about this important work, which could be the basis for tax reform in the future. Having been completed this far, the committee tax reform bill is only in the “file,” not in the wastebasket!



Listing From Wikipedia:





Subcommittee on TAX POLICY



Ex officio


Contact your Representative: http://www.house.gov/

Contact your Senators: http://www.senate.gov/senators/contact/


Contact the House Ways and Means Committee: http://waysandmeans.house.gov/

Contact the Senate Finance Committee:  http://www.finance.senate.gov/about/membership